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GOODWILL AND OTHER INTANGIBLE ASSETS | 12 Months Ended
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Feb. 02, 2025
Goodwill and Intangible Assets Disclosure [Abstract] |
GOODWILL AND OTHER INTANGIBLE ASSETS | GOODWILL AND OTHER INTANGIBLE ASSETS The changes in the carrying amount of goodwill, by segment (please see Note 19, “Segment Data,” for further discussion of the Company’s reportable segments), were as follows:
(In millions) | Calvin Klein North America |  | Calvin Klein International |  | Tommy Hilfiger North America |  | Tommy Hilfiger International |  | Heritage Brands Wholesale |  |  |  | Total
Balance as of January 29, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill, gross | $ | 781.8 |  |  | $ | 885.0 |  |  | $ | 203.0 |  |  | $ | 1,587.6 |  |  | $ | 105.0 |  |  |  |  | $ | 3,562.4 |
Accumulated impairment losses | (449.9) |  |  | (471.3) |  |  | (177.2) |  |  | — |  |  | (105.0) |  |  |  |  | (1,203.4) |
Goodwill, net | 331.9 |  |  | 413.7 |  |  | 25.8 |  |  | 1,587.6 |  |  | — |  |  |  |  | 2,359.0 |
Reduction of goodwill, gross related to the Heritage Brands intimates transaction | — |  |  | — |  |  | — |  |  | — |  |  | (105.0) |  |  |  |  | (105.0) |
Reduction of accumulated impairment losses related to the Heritage Brands intimates transaction | — |  |  | — |  |  | — |  |  | — |  |  | 105.0 |  |  |  |  | 105.0 |
Currency translation | — |  |  | (7.6) |  |  | — |  |  | (29.3) |  |  | — |  |  |  |  | (36.9) |
Balance as of February 4, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill, gross | 781.8 |  |  | 877.4 |  |  | 203.0 |  |  | 1,558.3 |  |  | — |  |  |  |  | 3,420.5 |
Accumulated impairment losses | (449.9) |  |  | (471.3) |  |  | (177.2) |  |  | — |  |  | — |  |  |  |  | (1,098.4) |
Goodwill, net | 331.9 |  |  | 406.1 |  |  | 25.8 |  |  | 1,558.3 |  |  | — |  |  |  |  | 2,322.1 |
Currency translation | — |  |  | (9.5) |  |  | — |  |  | (52.5) |  |  | — |  |  |  |  | (62.0) |
Balance as of February 2, 2025 |  |  |  |  |  |  |  |  |  |  |  |  |
Goodwill, gross | 781.8 |  |  | 867.9 |  |  | 203.0 |  |  | 1,505.8 |  |  | — |  |  |  |  | 3,358.5 |
Accumulated impairment losses | (449.9) |  |  | (471.3) |  |  | (177.2) |  |  | — |  |  | — |  |  |  |  | (1,098.4) |
Goodwill, net | $ | 331.9 |  |  | $ | 396.6 |  |  | $ | 25.8 |  |  | $ | 1,505.8 |  |  | $ | — |  |  |  |  | $ | 2,260.1 |
The Company recorded a $105.0 million reduction to goodwill, gross and a corresponding $105.0 million reduction to accumulated impairment losses during 2023 in connection with the Heritage Brands intimates transaction. Please see Note 3, “Divestitures,” for further discussion. The Company’s other intangible assets consisted of the following:
| 2024 |  | 2023
(In millions) | Gross Carrying Amount |  | Accumulated Amortization |  | Net |  | Gross Carrying Amount |  | Accumulated Amortization |  | Net
Intangible assets subject to amortization: |  |  |  |  |  |  |  |  |  |  |
Customer relationships | $ | 138.3 |  |  | $ | (128.5) |  |  | $ | 9.8 |  |  | $ | 143.7 |  |  | $ | (123.0) |  |  | $ | 20.7 |
Reacquired license rights | 392.5 |  |  | (140.6) |  |  | 251.9 |  |  | 408.4 |  |  | (134.2) |  |  | 274.2 |
Total intangible assets subject to amortization | 530.8 |  |  | (269.1) |  |  | 261.7 |  |  | 552.1 |  |  | (257.2) |  |  | 294.9 |
Indefinite-lived intangible assets: |  |  |  |  |  |  |  |  |  |  |
Tradenames (1) | 2,565.0 |  |  | — |  |  | 2,565.0 |  |  | 2,599.1 |  |  | — |  |  | 2,599.1 |
Reacquired perpetual license rights | 194.2 |  |  | — |  |  | 194.2 |  |  | 203.4 |  |  | — |  |  | 203.4 |
Total indefinite-lived intangible assets | 2,759.2 |  |  | — |  |  | 2,759.2 |  |  | 2,802.5 |  |  | — |  |  | 2,802.5 |
Total other intangible assets | $ | 3,290.0 |  |  | $ | (269.1) |  |  | $ | 3,020.9 |  |  | $ | 3,354.6 |  |  | $ | (257.2) |  |  | $ | 3,097.4 |
(1) The Company sold tradenames with a carrying value of $95.8 million during 2023 in connection with the Heritage Brands intimates transaction. Please see Note 3, “Divestitures,” for further discussion. The gross carrying amount and accumulated amortization of certain intangible assets include the impact of changes in foreign currency exchange rates. Amortization expense related to the Company’s intangible assets subject to amortization was $22.5 million and $23.1 million for 2024 and 2023, respectively. Assuming constant foreign currency exchange rates and no change in the gross carrying amount of the intangible assets, amortization expense for the next five years related to the Company’s intangible assets subject to amortization as of February 2, 2025 is expected to be as follows:
(In millions) |  |
Fiscal Year |  | Amount
2025 |  | $ | 16.2 |
2026 |  | 13.5 |
2027 |  | 13.3 |
2028 |  | 13.3 |
2029 |  | 12.3 |
Goodwill and Other Intangible Assets Impairment Testing Please see Note 1, “Summary of Significant Accounting Policies,” for discussion of the Company’s goodwill and intangible assets impairment testing process. Goodwill Impairment Testing 2024 Annual Impairment Test For the 2024 annual goodwill impairment test performed as of the beginning of the third quarter of 2024, the Company elected to bypass the qualitative assessment and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate the fair value of its reporting units. The Company’s annual goodwill impairment test for 2024 yielded estimated fair values in excess of the carrying amounts for all of its reporting units with assigned goodwill and therefore no impairment of goodwill was identified. The Tommy Hilfiger International reporting unit had an estimated fair value that exceeded its carrying amount of $2,874.5 million by approximately 10%. The carrying amount of goodwill allocated to this reporting unit as of the date of the test was $1,556.1 million. The fair value of the Tommy Hilfiger International reporting unit was determined using an income approach based on discounted projected future (debt-free) cash flows. The discount rate applied to these cash flows was based on the weighted average cost of capital for the reporting unit, which takes market participant assumptions into consideration. Estimated future operating cash flows were discounted at a rate of 13% to account for the relative risks of the estimated future cash flows. Holding all other assumptions constant, a 100 basis point change in the annual revenue growth rate assumption for this business would result in a change to the estimated fair value of the reporting unit of approximately $161 million. Likewise, a 100 basis point change in the weighted average cost of capital would result in a change to the estimated fair value of the reporting unit of approximately $281 million. While the Tommy Hilfiger International reporting unit was not determined to be impaired, it may be at risk of future impairment if the related business does not perform as projected, or if market factors utilized in the impairment analysis deteriorate, including an unfavorable change in the long-term growth rate or the weighted average cost of capital. 2023 Annual Impairment Test For the 2023 annual goodwill impairment test performed as of the beginning of the third quarter of 2023, the Company elected to perform a qualitative assessment first to determine whether it was more likely than not that the fair value of each reporting unit with allocated goodwill was less than its carrying amount. The Company assessed relevant events and circumstances, including industry, market and macroeconomic conditions, as well as Company- and reporting unit-specific factors. In performing this assessment, the Company considered the results of its quantitative annual goodwill impairment test performed in 2022, discussed below, and the impact at that time of (i) the improvement in certain macroeconomic conditions contributing to a favorable change in the Company’s market capitalization since the time of the 2022 test, which would imply a reduction to the risk premium included in the discount rate and, therefore, improvement in the fair values of the Company’s reporting units, and (ii) the Company’s then-current financial performance and updated financial forecasts, which were generally consistent with or exceeded the projections used in 2022. After assessing these events and circumstances, the Company determined that it was not more likely than not that the fair value of each reporting unit with allocated goodwill was less than its carrying amount and concluded that the quantitative goodwill impairment test was not required. No impairment of goodwill resulted from the Company’s annual impairment test in 2023. 2022 Annual Impairment Test For the 2022 annual goodwill impairment test performed as of the beginning of the third quarter of 2022, the Company elected to bypass the qualitative assessment and proceeded directly to the quantitative impairment test using a discounted cash flow method to estimate the fair value of its reporting units. As a result of the Company’s 2022 annual impairment test, the Company recorded $417.1 million of noncash impairment charges during the third quarter of 2022, which were included in goodwill impairment in the Company’s Consolidated Statement of Operations. The impairments were driven primarily by a significant increase in discount rates. The impairment charges, which related to the Calvin Klein Wholesale North America, Calvin Klein Licensing and Advertising International and Tommy Hilfiger Retail North America reporting units, were recorded to the Company’s segments as follows: $162.6 million in the Calvin Klein North America segment, $77.3 million in the Calvin Klein International segment and $177.2 million in the Tommy Hilfiger North America segment. Of these reporting units, Calvin Klein Licensing and Advertising International was determined to be partially impaired. The remaining carrying amount of goodwill allocated to this reporting unit as of the date of the test was $41.0 million. While this reporting unit was not determined to be fully impaired at the time of the 2022 annual impairment test, at the time it was considered to be at risk of further impairment in the future if the related businesses did not perform as projected or if market factors utilized in the impairment analysis deteriorated. As discussed in the 2024 annual impairment test section above, the Company performed a quantitative impairment test for all reporting units in the third quarter of 2024. No further impairment was identified for the Calvin Klein Licensing and Advertising International reporting unit and it was no longer considered to be at risk of further impairment in the future. With respect to the Company’s other reporting units that were not determined to be impaired, the Calvin Klein Licensing and Advertising North America reporting unit had an estimated fair value that exceeded its carrying amount of $464.4 million by 9%. The carrying amount of goodwill allocated to this reporting unit as of the date of the test was $330.4 million. While the Calvin Klein Licensing and Advertising North America reporting unit was not determined to be impaired at the time of the 2022 annual impairment test, it was considered to be at risk of future impairment if the related business did not perform as projected, or if market factors utilized in the impairment analysis deteriorated. As discussed in the 2024 annual impairment test section above, the Company performed a quantitative impairment test for all reporting units in the third quarter of 2024. No impairment was identified for the Calvin Klein Licensing and Advertising North America reporting unit and it was no longer considered to be at risk of impairment in the future. The fair value of the reporting units for goodwill impairment testing was determined using an income approach and validated using a market approach. The income approach was based on discounted projected future (debt-free) cash flows for each reporting unit. The discount rates applied to these cash flows were based on the weighted average cost of capital for each reporting unit, which takes market participant assumptions into consideration, inclusive of a Company-specific 4% risk premium to account for the additional risk of uncertainty perceived by market participants related to the Company’s overall cash flows due to the macroeconomic environment. Estimated future operating cash flows were discounted at rates of 16.0% or 16.5%, depending on the reporting unit, to account for the relative risks of the estimated future cash flows. For the market approach, used to validate the results of the income approach method, the Company used the guideline company method, which analyzes market multiples of adjusted earnings before interest, taxes, depreciation and amortization for a group of comparable public companies. The market multiples used in the valuation were based on the relative strengths and weaknesses of the reporting unit compared to the selected guideline companies. The Company classified the fair values of its reporting units as Level 3 fair value measurements due to the use of significant unobservable inputs. Indefinite-Lived Intangible Assets Impairment Testing 2024 Annual Impairment Test For the 2024 annual impairment test performed as of the beginning of the third quarter of 2024 for all indefinite-lived intangible assets, the Company elected to bypass the qualitative assessment and proceeded directly to the quantitative impairment test, using a discounted cash flow method to estimate fair value. The fair values for all indefinite-lived intangible assets exceeded their carrying amounts and, therefore, the assets were not impaired. The indefinite-lived intangible asset with the least excess fair value had an estimated fair value that exceeded its carrying amount by 19%. 2023 Annual Impairment Test For the 2023 annual indefinite-lived intangible assets impairment test performed as of the beginning of the third quarter of 2023, the Company elected to first assess qualitative factors to determine whether it was more likely than not that the fair value of any asset was less than its carrying amount. The Company assessed relevant events and circumstances, including industry, market and macroeconomic conditions, as well as Company- and asset-specific factors. In performing this assessment, the Company considered the results of its annual impairment testing performed in 2022, discussed below, and the impact at that time of (i) the improvement in certain macroeconomic conditions contributing to a favorable change in the Company’s market capitalization since the time of the 2022 test, which would imply a reduction to the risk premium included in the discount rate and, therefore, improvement in the fair value of each of its indefinite-lived intangible assets and (ii) the Company’s then-current financial performance and updated financial forecasts. After assessing these events and circumstances, the Company determined that it was not more likely than not that the fair value of each of its indefinite-lived intangible assets was less than its carrying amount and concluded that a quantitative impairment test was not required. No impairment of indefinite-lived intangible assets resulted from the Company’s annual impairment test in 2023. 2022 Annual Impairment Test For the 2022 annual impairment test of the TOMMY HILFIGER and Calvin Klein tradenames and the reacquired perpetual license rights for TOMMY HILFIGER in India performed as of the beginning of the third quarter of 2022, the Company elected to first assess qualitative factors to determine whether it was more likely than not that the fair value of any asset was less than its carrying amount. For these assets, no impairment was identified as a result of the Company’s then-most recent quantitative impairment test and the fair values of these indefinite-lived intangible assets substantially exceeded their carrying amounts. The asset with the least excess fair value had an estimated fair value that exceeded its carrying amount by approximately 183% as of the date of the Company’s then-most recent quantitative impairment test. The Company assessed relevant events and circumstances, including industry, market and macroeconomic conditions, as well as Company- and asset-specific factors, including changes in the weighted average cost of capital for each of its indefinite-lived intangible assets since the date of the most recent quantitative test and the Company’s recent financial performance and updated financial forecasts as compared to those used in the most recent quantitative tests. After assessing these events and circumstances, the Company determined qualitatively that it was not more likely than not that the fair values of these indefinite-lived intangible assets were less than their carrying amounts and concluded that the quantitative impairment test was not required. For the 2022 annual impairment test of the Warner’s tradename and the reacquired perpetual license rights recorded in connection with the Australia acquisition performed as of the beginning of the third quarter of 2022, the Company elected to bypass the qualitative assessment and proceeded directly to the quantitative impairment test. With regard to the reacquired perpetual license rights, the Company determined that its fair value substantially exceeded its carrying amount and, therefore, the asset was not impaired. The fair value of the Warner’s tradename exceeded its carrying amount of $95.8 million by 4% at the testing date. While the Warner’s tradename was not determined to be impaired at the time of the 2022 annual impairment test, it was considered to be at risk of future impairment if the related business did not perform as projected, or if market factors utilized in the impairment analysis deteriorated. As discussed in the 2023 annual impairment test section above, the Company performed a qualitative impairment test for all indefinite-lived intangible assets in the third quarter of 2023. No impairment was identified relating to the Warner’s tradename as a result of this test. The Warner’s tradename was subsequently sold on November 27, 2023 as part of the Heritage Brands intimates transaction, which resulted in a gain. Please see Note 3, “Divestitures,” for further discussion of the Heritage Brands intimates transaction. The fair value of the Warner’s tradename was determined using an income-based relief-from-royalty method. Under this method, the value of an asset is estimated based on the hypothetical cost savings that accrue as a result of not having to license the tradename from another party. These cash flows are discounted to present value using a discount rate that factors in the relative risk of the intangible asset. The Company discounted the cash flows used to value the Warner’s tradename at a rate of 16.0%. The fair value of the Company’s reacquired perpetual license rights recorded in connection with the Australia acquisition was determined using an income approach which estimates the net cash flows directly attributable to the subject intangible asset. These cash flows are discounted to present value using a discount rate that factors in the relative risk of the intangible asset. The Company discounted the cash flows used to value the reacquired perpetual license rights recorded in connection with the Australia acquisition at a rate of 19.0%. The Company classified the fair values of these indefinite-lived intangible assets as Level 3 fair value measurements due to the use of significant unobservable inputs. Considerations Since the 2024 Annual Impairment Tests There have been no significant events or change in circumstances since the date of the 2024 annual impairment tests that would indicate the remaining carrying amount of the Company’s goodwill and indefinite-lived intangible assets may be impaired as of February 2, 2025. There continues to be significant uncertainty in the current macroeconomic environment including the impacts of inflationary pressures globally, supply chain disruptions, the war in Ukraine and the Israel-Hamas war and their broader macroeconomic implications, and foreign currency volatility. In addition, there is significant uncertainty surrounding how the Company’s business may be impacted in the future as a result of MOFCOM’s decision to place the Company on the UEL. Please see Note 21, “Other Comments,” for further discussion. If economic conditions or market factors utilized in the impairment analysis deteriorate or otherwise vary from current assumptions (including those resulting in changes in the weighted average cost of capital), industry conditions deteriorate, business conditions or strategies for a specific reporting unit change from current assumptions, the Company’s businesses do not perform as projected, or there is an extended period of a significant decline in the Company’s stock price, the Company could incur additional goodwill and indefinite-lived intangible asset impairment charges in the future.

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